the business and retain them for the long term we examine customer retention and development processes. The focus of this chapter is customer acquisition, the first stage of the customer lifecycle. New customers have to be acquired to build companies. Even in well-managed companies there can be a significant level of customer attrition. These lost customers need to be replaced. We look at several important matters for CRM practitioners: which potential new customers to target, how to approach them and what to offer them. A customer retention strategy aims to keep a high proportion of valuable customers by reducing customer defections (churn), and a customer development strategy aims to increase the value of those retained customers to the company. Just as customer acquisition is focused on particular prospects, retention and development also focus on particular customers. Focus is necessary because not all customers are worth retaining and not all customers have potential for development. A number of important questions have to be answered when a company builds its customer retention strategy. Which customers will be targeted for retention? What customer retention strategies will be used? How will the customer retention performance be measured? We believe that these issues need to be considered carefully and programmed into a properly resourced customer retention plan. Many companies, perhaps as many as six out of ten, have no explicit customer retention plan in place. Most companies spend a majority of their time, energy and resources chasing new business, with 75 per cent or more of marketing budgets being earmarked for new customer acquisition. 9.2 CUSTOMER LIFECYCLE Customer Acquisition The first task in managing the customer lifecycle is to acquire customers. In the context of CRM, one should acquire customers that have a strong likelihood of being profitable over time. Customer acquisition is always the most important goal during new product launches and with new business start-ups. For small businesses with ambitions to grow, customer acquisition is often as important as customer retention. A one-customer company, such as BICC (now part of Balfour Beatty plc) that supplied copper cable to a single customer, British Telecom (BT), could double its customer base by acquiring one more customer. On the other hand, the loss of that single customer could spell the end of the company. With such high stakes, all too often companies feel compelled to acquire as many new customers as possible only to find out that they face problems of retention, service demands that they cannot manage and low margins. Acquiring profitable customers, as measured by customer lifetime value (CLV), should be the goal of CRM strategy. Even with careful targeted and well-developed and implemented customer retention plans, customers still need replacing. In a B2C context, customers may shift out of a targeted 151 CU IDOL SELF LEARNING MATERIAL (SLM)
demographic as they age and progress through the family lifecycle; their personal circumstances may change, and they no longer need and find value in your product; they may even die. In a B2B context, you may lose corporate customers due to merger and acquisition by another company with alternative supplier preferences; they may have stopped producing the goods and services for which your company provided input; they may have ceased trading. Customers lost to these uncontrollable causes indicate that customer acquisition will always be needed to replace natural attrition. A number of important questions have to be answered when a company puts together a customer acquisition plan. These questions concern targets, channels and offers as below: 1. Which prospects (potential new customers) will be targeted? 2. How will these prospects be approached? 3. What offer will be made? These issues need to be carefully considered and programmed into a properly resourced customer acquisition plan. Many marketing plans do not distinguish between customer acquisition and customer retention. Few consider lifetime value as a useful guide to customer acquisition, and often customer acquisition and retention are managed in different parts of the business, which runs the risk of recruiting customers who have little chance of becoming profitable. Acquisition should be guided by the same CLV considerations that underpin retention strategies. WHAT ARE NEW CUSTOMERS? A Customer can be new in one of two senses: 1. New to the product company 2. New to the company New-to-category New-to-category customers are customers who have either identified a new need or have found a new category of solution for an existing need. Consider the B2C context. When a couple have their first child, they have a completely new set of needs connected to the growth and nurturing of their child. This includes baby clothes, food, toys, for example. As the child grows, the parents are faced with additional new-to-category decisions, such as and elementary education. Sometimes, customers also become new-to-category because they find a new category to replace an existing solution. Cell phones have now largely replaced card- or cash-operated pay phones in many countries. Environmentally friendlier detergents and diapers are growing their share of market, as customers switch from current solutions. Sometimes, customers beat marketers to the punch, by adopting established products for new uses. Marketers then catch on and begin to promote that use. Arm and Hammer baking soda was used by customers to deodorize fridges and trash cans, and as a mild abrasive for 152 CU IDOL SELF LEARNING MATERIAL (SLM)
whitening teeth. The manufacturer, Church and Dwight, responded to this revelation and began promoting a variety of different applications. It is now an ingredient in toothpaste. Their website (www.armhammer.com) provides visitors with about 100 other tips for baking soda applications including cleaning, deodorizing, and personal care and baking. The website encourages visitors to write in describing novel applications for the product. Auto manufacturers noticed that many utility vehicles were not being bought by tradesmen but as fun vehicles for weekend use. They began promoting this use whilst at the same time trying to innovate in product design to meet the requirements of that market segment. The result has been the emergence of a completely new market segment - the market for Sports Utility Vehicles (SUVs). The same distinction between new needs and new solutions also exists in the B2B marketplace. A customer can be new-to-category if they begin an activity that requires resources that are new to the business. For example, when McDonald's entered the coffee shop market, they needed to develop a new set of supplier relationships. New-to-category customers may also be customers who find a new solution for an existing problem. For example, some clothing manufacturers now use computer-operated sewing machines to perform tasks that were previously performed by skilled labour and manual sewing machines. New-to-Company The second category of new customers is customers who are new to the company. New-to company customers are won from competitors. They might switch to your company because they feel you offer a better solution or because they value variety. Generally, new-to- company customers are the only option for growing customer numbers in mature markets where there are very few new-to-category customers. In developed economies, new players in grocery retail can only succeed by winning customers from established operators. They would not expect to convert those customers completely but to win a share of their spending by offering better customer-perceived value in one or more of important categories. Once the customer is in-store, the retailer will use merchandising techniques such as point-of-sale signs and displays to increase spending. New-to-category customers are sometimes expensive to recruit; sometimes they are not. For example, when children leave home for university, banks compete vigorously for their patronage. They advertise heavily in media used by students, communicate direct-to-student, and offer free gifts and low- or zero-cost banking for the duration of the studentship. On the other hand, supermarket retailers incur no direct costs in attracting these same students to their local stores. New-to-company customers can be very expensive to acquire, particularly if they are strongly committed to their current supplier. Commitment is reflected in a strong positive attitude to, or high levels of investment in, the current supplier. These both represent high switching costs. A powerful commitment to a current supplier can be difficult, and often is too 153 CU IDOL SELF LEARNING MATERIAL (SLM)
expensive, to break. High potential value customers are not always the most attractive prospects because of this commitment and investment. A lower value customer with a weaker commitment to the current supplier may be better prospect. 9.3 CUSTOMER RETENTION Customer retention is the maintenance of continuous trading relationships with customers over the long term. Customer retention is the mirror image of customer defection or churn. High retention is equivalent to low defection. Conventionally, Customer Retention is defined as follows: Customer retention is the number of customers doing business with a firm at the end of a financial year expressed as percentage of those who were active customers at the beginning of the year. However, the appropriate interval over which retention rate should be measured is not always one year. Rather, it depends on the customer repurchase cycle. Car insurance and magazine subscriptions are bought on an annual basis. Carpet tiles and hi-fis are not. If the normal hi fi replacement cycle is four years, then retention rate is more meaningful if it is measured over four years instead of 12 months. An additional complexity is added when companies sell a range of products and services each with different repurchase cycles. Automobile dealers might sell cars, parts, fuel and service to a single customer. These products have different repurchase cycles that make it very difficult for the dealer to have a whole-of-customer perspective on retention. Sometimes companies are not clear about whether an individual customer has defected. This is because of the location of customer-related data, which might be retained in product silos, channel silos or functional silos. Product Silos. Consider personal insurance. Insurance companies often have product-based information systems. Effectively, they regard an insurance policy as a customer. If the policy is renewed, the customer is regarded as retained. However, take a customer who shops around for a better price and, after the policy has expired, returns to the original insurer. The insurer may take the new policy to mean a new customer has been gained, and an old customer has churned. They would be wrong. Channel Silos. In the B2B context, independent office equipment dealers have formed into cooperative buying groups to purchase at lower prices and experience other economies of scale in marketing. When a dealer stops buying direct from Brother Electronics, and joins a buying group, Brother's customer data may report a defection, but all that has happened is that the dealer has begun to buy through a different channel. Telecoms companies acquire customers through many channels. Consider a customer who buys a 12-month mobile telecoms contract from a Vodafone-owned retail outlet. Part-way through the year Vodafone launches a new pay-as-you-go product with no contractual obligation. The customer allows 154 CU IDOL SELF LEARNING MATERIAL (SLM)
her current contract to expire, then buys the new pay-as-you-go product not from a Vodafone outlet but from a supermarket. Vodafone regards her as a lost customer because the contract was not renewed. They would be wrong. Functional Silos. Customer-related data are often kept in functional silos that are not integrated to provide a whole-of-customer perspective. A customer might not have made a product purchase for several years and is therefore regarded as a churned customer on the sales database. However, the same customer might have several open queries or issues on the customer service database and is therefore regarded as still active. The use of aggregates and averages in calculating customer retention rates can mask a true understanding of retention and defection. This is because customers differ in their sales, costs-to-serve and buying behaviours. It is not unusual for a small number of customers to account for a large proportion of company revenue. If you have 100 customers and lose 10 in the course of a year, your raw defection rate is 10 per cent. But what if these customers account for 25 per cent of your company's sales? Is the true defection rate 25 per cent? Consideration of profit makes the computation even more complex. If the 10 per cent of customers that defected produce 50 per cent of your company's profits, is the true defection rate 50%? What happens if the 10 per cent of customers lost are at the other end of the sales-and profit spectrum? In other words, what if they buy very little and/or have a high cost-to-serve? It could be that the 10 per cent contributes less than 5 per cent of sales and actually generates a negative profit; that is, they cost more to serve than they generate in margin. The loss of some customers might enhance the company's profit performance. It is not inconceivable that a company could retain 90 per cent of its customers, 95 per cent of its sales and 105 per cent of its profit! A solution to this problem is to consider three measures of customer retention: 1. Raw Customer Retention Rate. This is the number of customers doing business with a firm at the end of a trading period expressed as a percentage of those who were active customers at the beginning of the period. 2. Sales-Adjusted Retention Rate. This is the value of sales achieved from the retained customers expressed as a percentage of the sales achieved from all customers who were active at the beginning of the period. 3. Profit-Adjusted Retention Rate. This is the profit earned from the retained customers expressed as a percentage of the profit earned from all customers who were active at the beginning of the period. A high raw customer retention rate does not always signal excellent customer retention performance. This is because customer defection rates vary across cohorts of customers. Defection rates tend to be much higher for newer customers than longer tenure customers. 155 CU IDOL SELF LEARNING MATERIAL (SLM)
Over time, as seller and buyer demonstrate commitment, trust grows and it becomes progressively more difficult to break the relationship. Successful customer acquisition programmes could produce the effect of a high customer defection rate, simply because newly acquired customers are more likely to defect. A high sales-adjusted customer retention rate might also need some qualification. Consider a corporate customer purchasing office equipment. The customer's business is expanding fast. It bought 30 computers last year, 20 of which were sourced from Apex Office Supplies. This year it bought 50 computers of which 30 were from Apex. From Apex's point of view it has grown customer value by 50 per cent (from 20 to 30 machines), which it might regard as an excellent achievement. However, in a relative sense, Apex's share of customer has fallen from 67 per cent (20/30) to 60 per cent (30/50). How should Apex regard this customer? The customer is clearly a retained customer in a 'raw' sense, has grown in absolute value, but fallen in relative value. Also consider a retail bank customer who maintains a savings account, but during the course of a year transfers all but a few dollars of her savings to a different institution in pursuit of a better interest rate. This customer is technically still active, but significantly less valuable to the bank. Managing Customer Retention or Value Retention? The discussion above indicates that companies should focus on retaining customers that contribute value. Sometimes this will mean that the focus is not on retention of customers, per se, but on retention of share-of-wallet. In the banking industry, for example, it may be more important for companies to focus on managing the overall downward migration of customer spending than customer retention. Many customers simply change their buying behaviour rather than defect. Changes in buying behaviour may be responsible for greater changes in customer value than defection. One bank, for example, lost 3 per cent of its total balances when 5 per cent of checking (or current) account customers defected in a year, but lost 24 per cent of its total balances when 35 per cent of customers reduced the amounts deposited in their checking accounts. The need to manage migration rather than defection is particularly true when customers engage in portfolio purchasing by transacting with more than one supplier. Improving customer retention is an important objective for many CRM strategies. Its definition and measurement need to be sensitive to the sales, profitability and value issues mentioned above. It is important to remember that the fundamental purpose of focusing CRM efforts on customer retention is to ensure that the company maintains relationships with value-creating customers. It may not be beneficial to maintain relationships with all customers. Some may be too costly to serve. Others may be strategic switchers constantly in search of a better deal. These can be value-destroyers, not value-creators. ECONOMICS OF CUSTOMER RETENTION 156 CU IDOL SELF LEARNING MATERIAL (SLM)
There is a strong economic argument in favour of customer retention. The argument goes as follows: Increasing Purchases as Tenure Grows. Over time customers come to know their suppliers. Providing the relationship is satisfactory, trust grows whilst risk and uncertainty are reduced. Therefore, customers commit more of their spending to those suppliers with which they have a proven and satisfactory relationship. Also, because suppliers develop deeper customer intimacy over time, they can enjoy better yields from their cross-selling efforts. Lower Customer Management Costs Over Time. The relationship start-up costs that are incurred when a customer is acquired can be quite high. It may take several years for enough profit to be earned from the relationship to recover those acquisition costs. For example, it can take six years to recover the costs of winning a new retail bank customer. In the B2B context, in particular, ongoing relationship maintenance costs such as selling, and service costs can be low relative to the costs of winning the account. Therefore, there is high probability that the account will become more profitable on a period-by-period basis as tenure lengthens. These relationship maintenance costs may eventually be significantly reduced or even eliminated as the parties become closer over time. In the B2B context, once automated processes are in place, transaction costs are effectively eliminated, and portals largely transfer account service costs to the customer. In the B2C context, especially in retailing, the assertion that acquisition costs generally exceed retention costs is hard to prove. This is in part because it is very difficult to isolate and measure customer acquisition costs. Customer Referrals. Customers who willingly commit more of their purchases to a preferred supplier are generally more satisfied than customers who do not. They are therefore more likely to utter positive word-of-mouth (WOM) and influence the beliefs, feelings and behaviours of others. Research shows that customers who are frequent buyers are heavier referrers. For example, online clothing customers who have bought once refer three other people; after ten purchases they will have referred seven. In consumer electronics, the one- time customer refers four; the ten times customer refers. These referred customers spend about 50-75 per cent of the referrer's spending over the first three years of their relationship.\" However, it is also likely that newly acquired customers, freshly enthused by their experience, would be powerful WOM advocates, perhaps more than longer-term customers who are more habituated. Premium Prices. Customers who are satisfied in their relationship may reward their suppliers by paying higher prices. This is because they get their sense of value from more than price alone. Customers in an established relationship are also likely to be less responsive to price appeals offered by competitors. There is strong empirical evidence linking customer satisfaction to willingness to pay. These conditions mean that retained customers are generally more profitable than newly acquired customers. Drawing from their consulting experience, Dawkins and Reichheldreport 157 CU IDOL SELF LEARNING MATERIAL (SLM)
that a 5 per cent increase in customer retention rate leads to an increase in the net present value of customers by between 25 per cent and 95 per cent across a wide range of industries including credit cards, insurance brokerage, auto services and office building management. ¹4 In short, customer retention drives up customer lifetime value (CLV). STRATEGIES FOR CUSTOMER RETENTION Positive and negative retention strategies An important distinction can be made between strategies that lock the customer in by penalizing their exit from a relationship, and strategies that reward a customer for remaining in a relationship. The former is generally considered negative, and the latter positive customer retention strategies. Negative customer retention strategies impose high switching costs on customers, discouraging their defection. In a B2C context, mortgage companies have commonly recruited new customers with attractive discounted interest rates. When the honeymoon period is over, these customers may want to switch to provider, only to discover that they will be hit with early redemption and exit penalties. Customers wishing to switch retail banks find that it is less simple than anticipated: direct debits and standing orders have to be reorganized. In a B2B context, a customer may have agreed to purchase a given volume of raw material at a quoted price. Some way through the contract a lower cost supplier makes a better offer. The customer wants to switch but finds that there are penalty clauses in the contract. The new supplier is unwilling to buy the customer out of the contract by paying the penalties. Negative customer retention strategies impose high switching costs on customers, discouraging their defection. In a B2C context, mortgage companies have commonly recruited new customers with attractive discounted interest rates. When the honeymoon period is over, these customers may want to switch to provider, only to discover that they will be hit with early redemption and exit penalties. Customers wishing to switch retail banks find that it is less simple than anticipated: direct debits and standing orders have to be reorganized. In a B2B context, a customer may have agreed to purchase a given volume of raw material at a quoted price. Some way through the contract a lower cost supplier makes a better offer. The customer wants to switch but finds that there are penalty clauses in the contract. The new supplier is unwilling to buy the customer out of the contract by paying the penalties. Some customers find these switching costs are so high that they remain customers, though unwillingly. The danger for CRM practitioners is that negative customer retention strategies produce customers who feel trapped. They are likely to agitate to be freed from their obligations, taking up much management time. Also, they are likely to utter negative word of-mouth; in today's social media environment it is easier than ever and highly effective. They are unlikely to do further business with that supplier. Companies that pursue these strategies argue that customers need to be aware of what they are buying and the contracts 158 CU IDOL SELF LEARNING MATERIAL (SLM)
they sign. They argue that the total cost of ownership (TCO) of a mortgage should and does include early redemption costs. When presented with dissatisfied customers complaining about high relationship exit (switching) costs, companies have a choice. They can either enforce the terms and conditions, or not. The latter path is more attractive when the customer is strategically significant, particularly if the company can make an offer that matches that of the prospective new supplier. 9.4 CUSTOMER DEVELOPMENT Customer development is the process of growing the value of retained customers. Companies generally attempt to cross-sell and up-sell products into the customer base whilst still having regard for the satisfaction of the customer. Cross-selling, which aims to grow share-of-wallet, can be defined as follows: Cross-selling is selling additional products and services to an existing customer. Up-selling can be defined as follows: Up-selling is selling higher priced or higher margin products and services to an existing customer. Customers generally do not respond positively to persistent and repeated efforts to sell additional products and services that are not related to their requirements. Indeed, there is an argument that companies should down-sell where appropriate. This means identifying and providing lower cost solutions to the customers' problems, even if it means making a smaller margin. Customers may regard up-selling as opportunistic and exploitative, thereby reducing the level of trust they have in the supplier and putting the relationship at risk. However, multi-product ownership creates a structural bond that decreases the risk of relationship dissolution. STRATEGIES FOR CUSTOMER DEVELOPMENT There are a number of CRM technologies that are useful for customer development purposes. Campaign Management Softwareis used to create up-sell and cross-sell customer development campaigns in single or multiple communication channels and track their effectiveness, particularly in terms of sales and incremental margin. Event-Based Marketing. Up-selling and cross-selling campaigns are often associated with events. For example, a bank will cross-sell an investment product to an existing customer if deposits in a savings account reach a trigger point. Data Mining. Cross-sell and up-sell campaigns are often based on intelligent data mining. Transactional histories record what customers have already bought. Data mining can tell you the probability of a customer buying any other products (propensity. to-buy), based on their 159 CU IDOL SELF LEARNING MATERIAL (SLM)
transactional history or profile. First direct, an online and telephone bank, uses propensity to buy scores to run targeted, event-driven cross-sell campaigns through direct mail and call centres. They achieve high conversion rates by making follow-up out-bound telephone calls. Customization. Cross-sell and up-sell offers can be customized at segment or unique customer level, based upon the transactional history and profile of the target. Also personalized is the communication to the customer and the channel of communication - email, surface mail, social media, SMS or phone call, for example. Channel Integration. Customer development activities can be integrated across channels. When different channels make different offers to the same customer at the same time, this creates bad customer experience. In retail, channel integration is observed when channels such as stores, Web and direct-to-consumer channels act in an integrated, customer-centric manner. For this to happen, customer information and customer development plans need to be shared across channels. Integrated Customer Communications. CRM practitioners generally prefer that the messages communicated to customers are consistent across all channels. Marketing Optimization. Optimization software is available from CRM analytics organizations such as SAS. Optimization enables marketers to enjoy optimal returns rom up- sell and cross-sell campaigns across multiple channels and customer segments, taking account of issues such as budget constraints, communication costs, contact policies (e.g., no more than two offers to be communicated to any customer in any quarter), and customers' transactional histories and propensities-to-buy. In professional services, the client audit is often the foundation for cross-selling and up- selling of clients. In B2B environments, sales reps need to be alert to opportunities for cross- and up-selling. This means understanding customers' operations and knowing their product/ service innovation plans. In mature markets, where customer acquisition is difficult or expensive, the development of retained customers is an important source of additional revenues. For example, in the mature mobile telecoms market, the penetration of handsets is at a very high level. Winning new-to- market customers is regarded as too difficult, since these are the laggards, and expensive to convert. Mobile telecommunication service providers tend to focus on selling additional data services to their existing customers, diversifying beyond voice services. 9.5 STRATEGIES FOR TERMINATING CUSTOMER RELATIONSHIPS Companies rarely hesitate to terminate employee positions that serve no useful purpose. In a similar vein, a review of customer value might identify customers that are candidates for dismissal, including customers who will never be profitable or who serve no other useful 160 CU IDOL SELF LEARNING MATERIAL (SLM)
strategic purpose. More specifically, these include fraudsters, persistent late payers, and serial complainants, those who are capricious and change their minds with cost consequences for the supplier, and switchers who are in constant search for a better deal. This certainly happens in reverse; customers sack suppliers when they switch vendors. Relationships dissolve when one partner no longer views the relationship as worth continuing investment. In a B2B context, activity links, resource ties and actor bonds would be severed. However, even if there is no strategic value in a customer, dissolution of the relationship is not always an attractive option because of contractual obligations, expectations of mutuality, word-of-mouth risks and network relationships? Sacking customers, sometimes called 'demarketing', needs to be conducted with sensitivity. Customers may be well connected and spread negative word-of-mouth about their treatment. UK banks began a programme of branch closures in geographic areas that were unprofitable. Effectively they were shedding low value customers in working-class and rural areas. There was considerable bad publicity, government intervened, and the closure strategy was reviewed. There are a number of strategies for shedding unprofitable customers: Make them profitable by raising prices or cutting the cost-to-serve. A company can simply increase prices to increase margin; customers who pay the higher price become profitable. If most customers are retained at the higher price, it suggests you were not charging enough in the first place! Customers unwilling to pay the higher price, find insufficient value in your product given the higher price, effectively remove themselves from the customer base when they stop transacting. Where price is customized, this is a feasible option. When banks introduced transaction fees for unprofitable customers many lefts in search of a better deal. Similarly, you can reduce service costs, forcing customers to use lower cost channels, such as self-service online. Un-bundle the offer. You could take a bundled value proposition, un-bundle it, reprice the components and reoffer it to the customer. This makes transparent the value in the offer and enables customers to make informed choices about whether they want to pay the un-bundled price. Respecify the product. This involves redesigning the product so that it no longer appeals to the customer(s) you want to sack. For example, the airline BA made a strategic decision to target frequent-flying business travellers they regarded as high value. They redesigned the cabins in their fleet, reducing the number of seats allocated to economy travellers. Reorganize sales, marketing and service departments so that they no longer focus on segments or customers you no longer wish to retain. You would stop running marketing campaigns targeted at these customers, prevent salespeople calling on them and discontinue servicing their queries. 161 CU IDOL SELF LEARNING MATERIAL (SLM)
Introduce ABC class service. A business-to-business company could migrate customers down the service ladder from high-quality face-to-face service from account teams to sales representatives, or even further to contact centre or web-based self-service. This eliminates cost from the relationship and may convert an unprofitable customer into profit. In a B2C context, this equates to shifting customers from a high-cost service channel into a low-cost service channel. Frontier Bank, for example, introduced a no-frills telephone account for business customers who needed no cash processing facilities. A minimum balance was needed for the bank to cover its operating costs. Customers who did not maintain the targeted credit balance in their account were invited to switch to other products in other channels. If they refused the bank asked them to close their account. Empirical evidence on how companies terminate customer relationships is sparse. However, one study of German engineering companies reports that very few firms have a systematic approach to managing unprofitable customers. Most respondents confirm that unprofitable relationships are commonplace; indeed, a fifth of firms have a customer base more than half of which is not, or not yet, profitable. Companies fall into three clusters in respect of the customer-sacking behaviours: 1. Hardliners take an active and rigorous stance in terminating unprofitable relationships, including the regular evaluation of their customer portfolio. Qualitative implications, such as a potential loss of trust in relationships with other customers or negative word of-mouth do not seem to hinder their willingness to sack unprofitable customers. 2. Appeasers take a more cautious approach concerning the termination of unprofitable relationships, due to strategic considerations such as not playing customers into competitors' hands. 3. The undecided are reluctant to terminate unprofitable relationships, mainly because they fear the costs of attracting new customers. 9.6SUMMARY The first task in managing the customer lifecycle is to acquire customers. New-to-company customers can be very expensive to acquire, particularly if they are strongly committed to their current supplier. Customer retention is the number of customers doing business with a firm at the end of a financial year expressed as percentage of those who were active customers at the beginning of the year. Companies generally attempt to cross-sell and up-sell products into the customer base whilst still having regard for the satisfaction of the customer. Cross-selling is selling additional products and services to an existing customer. 162 CU IDOL SELF LEARNING MATERIAL (SLM)
Sacking customers, sometimes called 'demarketing', needs to be conducted with sensitivity. 9.7KEYWORDS New-to-category customers are customers who have either identified a new need or have found a new category of solution for an existing need. Customer retention is the number of customers doing business with a firm at the end of a financial year expressed as percentage of those who were active customers at the beginning of the year. Customer development is the process of growing the value of retained customers. Cross-selling is selling additional products and services to an existing customer. Up-selling is selling higher priced or higher margin products and services to an existing customer. 9.8 LEARNING ACTIVITY 1. What is Customer Acquisition? ___________________________________________________________________________ ___________________________________________________________________________ 2. What is Customer Retention? ___________________________________________________________________________ ___________________________________________________________________________ 9.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Explain stages involved in customer life cycle? 2. What is a new Customer? 3. What is Customer Retention? 4. What is Customer Development? 5. Which customers need to be retained? Long Questions 1. What is Customer Life cycle? 2. What are the strategies used to recruit new customers? 3. Write a note on economics of customer retention? 163 CU IDOL SELF LEARNING MATERIAL (SLM)
4. How to select which customers to target for retention? 5. Explain the strategies for terminating customer relationships? B. Multiple Choice Questions 1. This is a broad category of applications and technologies for gathering, storing, analysing, and providing access to data to help enterprise users make better business decisions. a. Best practice b. Data art c. Business information warehouse d. Business intelligence 2. This is an arrangement in which a company outsources some or all of its customer relationship management functions to an application service provider (ASP). a. Spendmanagement b. Supplier relationshipmanagement c. Hosted CRM d. Customer information controlsystem 3. Which of the following is NOT a characteristic of the Business-to-Business arena? e. Large markets f. Wide geographic spread g. Complex buyer behaviour h. Low volume of transactions 4. Electronic booksellers like amazon.com and barnesandnoble.com are likely to enjoy strong sales in the future because books are a product category that: a. Can be delivered digitally b. Are highly standardized c. Require audio or video demonstration d. Do not require pre-purchase trial 5. Which of the following is NOT a benefit of direct marketing? 164 a. Convenience CU IDOL SELF LEARNING MATERIAL (SLM)
b. Interactive c. Customer relationship building d. Assists client prospecting Answers 1 -c , 2 –c , 3 - d, 4 –d, 5 -d 9.10 REFERENCES Reference Books Customer Relationship Management: A Strategic Approach to Marketing by Mukherjee K Customer Relationship Management: Concepts and Technologies by Francis Buttle and Stan Maklan Customer Relationship Management by S Sheel Rani Data Mining Techniques: For Marketing, Sales and Customer Relationship Management” by Gordon S Linoff and Michael J ABerry Customer Relationship Management: Concept, Strategy, and Tools by V Kumar and Werner Reinartz Text Book References Day, G.S. (1986). Analysis for strategic market decisions. St Paul, MN: West Publishing. 4 Cokins, G. (1996). Activity-based cost management: making it work. New York: McGraw- Hill. Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. Rust, R.T., Lemon, K.N. and Narayandas, D. (2005). Customer equity management. Upper Saddle River, NJ: Pearson Prentice Hall. Saunders, J. (1994). Cluster analysis. In G.J. Hooley and M.K. Hussey (eds). Quantitative methods in marketing. London: Dryden Press, pp. 13-28. Websites https://www.intotheminds.com/blog/en/experiential-marketing/ 165 CU IDOL SELF LEARNING MATERIAL (SLM)
https://study.com/academy/lesson/experiential-marketing-definition-strategies-example.html 166 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT 10 -INFORMATION TECHNOLOGY FOR CRM STRUCTURE 10.0 Learning Objectives 10.1 Introduction 10.2 CRM Analytic 10.3 CRM Architecture 10.4 Application of Architecture 10.5Summary 10.6Keywords 10.7Learning Activity 10.8Unit End Questions 10.9References 10.0 LEARNING OBJECTIVES After studying this unit, you will be able to: Understand the concept of Analytical CRM Explain the steps in CRM Analytics Explain how CRM analysis in business world List down Creative in CRM architecture Describe how Application of CRM architecture works 10.1INTRODUCTION Analytical CRM consists of applications that enable businesses to analyse relevant data in order to achieve a more meaningful and profitable interaction with their customers. It uses customer data for analysis, modelling and evaluation to create a mutually beneficial relationship between a company and its customers, and helps to optimize information sources for a better understanding of customer behaviour. Analytical CRM applications include database marketing, sales analysis tools and vertical and application-specific analytic tools. Analytical CRM is fast gaining ground as a hot trend in the CRM industry. Firms are now encouraging their analytical teams to work closer with their customers. They are endeavouring to see what sort of analysis actually matters to the customer through finding out what contributes to their highest satisfaction. The interest in this new functionality is easily 167 CU IDOL SELF LEARNING MATERIAL (SLM)
one of the fastest growing trends in the industry. It is fast making CRM news as it offers ample room for growth in profitability 10.2 CRMANALYTICAL Customer relationship management (CRM) is a widely used business marketing system in which companies use software database applications to collect customer data, analyse it, and interpret it for use in enhancing customer experiences and improving marketing efficiency. The advancement in the information and communication technology has made the new millennium \"e-millennium'\\ Now, service organizations activities are not confined to one single activity, but they provide a plethora of services keeping in mind the requirementand convenience of customers. In the fast-changing marketing environment worldwide service companies in India not only need to learn the rules but also upgrade the skills ^ well as the tools of modern marketing. Technology, people and customers are the three elements on which the success of service companies hinges in the e-millennium. Technology has been an enabler in managing the pace and quantum of changes. Skilled human resource management has brought about success in technology, which is fundamental in generating these capabilities. CRM applications are a convergence of functional components, advanced technologies and channels. Applications of e-CRM are stored for efficient retrieval. The IT tools can be used effectively to facilitate customer relationship practices of an organization. The power of CRM provides a lot of managerial opportunities to the organization. It intelligently incorporates customer data and generates perspectives on customer values, spending, affinity, and segmentation. Every element of business is analysed, as detailed below: 1. Customer Analytics: This is the foundational analytic for analysing customer knowledge. It gives a better picture of customer behaviour and produces an accurate knowledge of all customers through modelling, analysing consumer values, and reviewing client portfolios or profiles. 2. Marketing Analytics- These aids in the discovery of new market possibilities as well as the evaluation of their potential worth. It also aids in the management of marketing strategies, as well as the scaling and planning of marketing performance at the district, regional, and national levels. By continually evaluating organisational sales activity, sales analytics provides a vital environment for planning, simulating, and predicting sales volumes and profitability. It aids in the proper pipelining of all sales prospects by indulging and enhancing the sales cycle. 3. Service Analytics- Analytical CRM plays a critical role in improving services by addressing all inquiries about customer satisfaction, product quality and pricing, complaint 168 CU IDOL SELF LEARNING MATERIAL (SLM)
management, and so on. It also aids in the improvement and optimization of services by evaluating income and cost in a sophisticated manner. 4. Channel Analytics- This sort of analysis aids in determining consumer behaviour based on channel preferences, such as online, human interaction, and telephone. This data is effectively incorporated into customers' knowledge bases, allowing them to be reached as needed. Analytical CRM system's important outcomes might assist the company deal with consumers based on their values in a variety of ways. It also aids in evaluating which customers are worth investing in, which may be handled on a par, and which should be avoided. The following are some of the most common challenges encountered while implementing customer relationship management: 1) Lack of a framework: The customer relationship management project will be insignificant if the goals that must be set are not outlined, since the results will not be attractive to the firm. The first hurdle to overcome is uncertainty before adopting or even selecting a customer relationship management solution. First and foremost, develop a business case for the customer relationship management effort by identifying clear and quantifiable objectives. It might involve things like simplifying sales and marketing, as well as automation to boost productivity. 2. Integration gone wrong: If the multiple verticals of a firm are not integrated while using customer relationship management, the ultimate outcome will not be as intended. For a successful customer relationship management, most implementations need modification. Effective suppliers ensure that multiple functionalities operate together well and that their next software release includes remedies for your company's particular issues. 3) Status deficiency: Customer Relationship Management is a business process transformation that is enabled by technology, not a technological solution. There are sure to be issues if business managers still perceive it to be a part of IT. 4) Outdated or incorrect data: Customer Relationship Management process works effectively by analysing data. To guarantee that the goal of implementing customer relationship management is not undermined, all outdated and inaccurate data must be deleted after deployment. By evaluating data, the Customer Relationship Management process is effective. To guarantee that the goal of implementing customer relationship management is not undermined, all outdated and inaccurate data must be deleted after deployment. 169 CU IDOL SELF LEARNING MATERIAL (SLM)
5) Change: Employees will oppose anything new since it will take them out of their comfort zone. The advantages of using customer relationship management must be communicated. Steps in Analytical CRM Process After the client data is collected and stored, the actual analysis can take place. The analysis process is roughly made of the following steps: Step 1: Problem Formulation: What does one wants to know. Is answering the question relevant and possible (technically, financially, and organizationally). Typical a CRM analysis question is about: 1) Segmentation of clients 2) Acquisition analysis (what is the quality of various lists or databases) 3) Relation analysis (expected retention, opportunities for cross-selling, deep-selling, up- selling) and 4) Channel or approach analysis (which channel or approach gives the best results). Step 2: Preparation: The various techniques of preparing data for analytical CRM process includes the random sample survey, relevant variables, cases, spread in scores. Step 3: Definitive Analysis: It can be performed by using following techniques: 1) Statistical techniques (Regression analysis, dynamic regression, exploratory factor analysis, exponential smoothing, ARIMA); 2) Data mining, typically aimed at discovering non-obvious or non-linear patterns in the data; 3) Machine learning (Artificial intelligence) techniques, such as - neural networks, genetic algorithms, association rules, and case-based reasoning. Step 4: Visualizing: it means visualizing the results in such a way that it is understandable for the users. Analytical CRM consists of applications that enable businesses to analyse relevant data in order to achieve a more meaningful and profitable interaction with their customers. It uses customer data for analysis, modelling and evaluation to create a mutually beneficial relationship between a company and its customers, and helps to optimize information sources for a better understanding of customer behaviour. Analytical CRM applications include database marketing, sales analysis tools and vertical and application-specific analytic tools. Analytical systems provide business intelligence. They are the major consumers of the data produced by the operational systems. Analytical systems might consist of: 1) Data warehouses, which hold cleansed data that is documented in terms of its source, transformation rules, calculations, etc. The storehouses are the source of integrated, re- engineered, detailed snapshots of customer data. 170 CU IDOL SELF LEARNING MATERIAL (SLM)
2) Data marts are a subset of the data warehouse. This data has a known set of requirements and reports and is formatted for a particular function or department. For example, a marketing department's data mart, where data is aggregated or summarized for use in customer profiling, marketing campaign planning and sales channel analysis. Analysis is the most critical to CRM success. Analytical CRM solutions enable the effective management of a customer relationship. Only through analysis of customer data can a company begin to understand behaviours, identify buying patterns and trends, and discover causal relationships. Together these help to more accurately model and predict future customer satisfaction and behaviour and lay a quantified foundation for strategic decision- making. 10.3 ARCHITECTURE CRM The advancement in the information and communication technology has made the new millennium \"e-millennium'\\ Now, service organizations activities are not confined to one single activity, but they provide a plethora of services keeping in mind the requirement and convenience of customers. In the fast-changing marketing environment worldwide service companies in India not only need to learn the rules but also upgrade the skills ^ well as the tools of modern marketing. Technology, people, and customers are the three elements on which the success of service companies hinges in the e-millennium. Technology has been an enabler in managing the pace and quantum of changes. Skilled human resource management has brought about success in technology, which is fundamental in generating these capabilities. The data in a data warehouse comes from operational systems of the organization as well as from other external sources. These are referred to as source systems together. Data is taken from source systems and placed in a data staging area, where it is cleaned, processed, merged, and duplicated in order to prepare it for usage in the data warehouse. The data staging area is usually a group of computers that perform simple tasks like sorting and sequential processing. There are no query or presentation services available in the data staging area. A presentation server is defined as a system that delivers query or presentation services. A presentation server is the machine on which the data from the data staging area is imported, organised, and stored for immediate use. 1. Source Systems 2. Data Staging Area Customers are the lifeblood of every business, therefore it's critical to respond quickly and maintain positive customer relationships. This customer relationship management article takes a new look at the main needs for a CRM process that connects our company to our customers'. We'll learn how to implement an 171 CU IDOL SELF LEARNING MATERIAL (SLM)
effective customer relationship management programme in our company and reap the huge rewards that come with it. Businesses that need to handle fast expansion, altering market needs, and growing consumer expectations can benefit from e-customer relationship management solutions. By automating critical sales, marketing, customer service, engineering, and quality assurance activities throughout the company, our apps adhere to the client's particular requirements and help build customer connections. Customers may get in-depth information about the company's goods and services, order history, product updates, and service request fulfilment through the customer self-service applications we build. CRM is centred on managing the customer life cycle, as seen in the diagram above. Begin by acquiring customers, either through traditional advertising or through recommendations. Following that, we go on to client development via customization. Then, via a joint learning process, we go on to customer development through personalization of communication and customisation of products and services. Then use cross-selling and up- selling to capitalise on the customer's equity. Work to retain existing clients while simultaneously benefiting from new consumers gained through personal referrals. CRMArchitecture there are three fundamental components in CRM: Operational - automation of basic business processes (marketing, sales, service) Analytical - analysis of customer data and behaviour using business intelligence Collaborative - communicating with clients 10.4 IMPORTANT APPLICATION ARCHITECTURE Operational CRM is a term used to describe a type of customer relationship The \"front office\" business procedures are supported by operational CRM (sales, marketing and service). Each encounter with a client is typically recorded in the customer's history, and employees can access consumer information from the database as needed. Operational CRM, according to Gartner Group, is divided into three categories: Automation of the sales force (SFA) Forecasting, sales administration, tracking client preferences and demographics, performance management, lead management, account management, contact management, and quotation management are just a few of the essential sales and sales force management operations that SFA automates. Certain service requests, complaints, product returns, and inquiries are automated using CSS. Marketing automation for businesses (EMA) 172 CU IDOL SELF LEARNING MATERIAL (SLM)
EMA offers data on rivals, industry trends, and macro environmental factors, as well as information on the business environment. Marketing efficiency is improved by using EMA apps. Because it works directly with clients, integrated CRM software is frequently referred to as a \"front office solution.\" CRM software is used by many call centres to store client information. When a call is received, the system shows the customer information connected with it (determined from the number of the caller). The customer's call centre agent might provide additional information during and after the conversation. Some client services, such as allowing consumers to view their bank account information online or via a WAP phone, can be completely automated. Figure 10.1EA Layers 10.5 SUMMARY Commercial CRM software packages range from niche tools that perform limited functions such as personalizing websites for specific customers, to large-scale enterprise applications that capture myriad interactions with customers, analyse them with sophisticated reporting tools, and link to other major enterprise applications such as supply chain management and enterprise. The more comprehensive CRM packages contain modules for Partner Relationship Management (PRM) and Employee relationship Management (ERM). 173 CU IDOL SELF LEARNING MATERIAL (SLM)
CRM software enables sales marketing, and delivery departments to easily share customer and prospect information. It increases each salesperson's efficiency in reducing cost per sales well as the cost of acquiring new customers and retaining old ones. CRM soft c also has capabilities for sales forecasting, territory management selling CRM software enables sales marketing, and delivery departments to easily share customer and prospect information. It increases each salesperson's efficiency in reducing cost per sales 10.6 KEYWORDS Sales force Automation (SFA):Sales force automation in CRM help sales staff to increase their productivity by focusing sales effort on the most profitable customers Commercial CRM: software packages range from niche tools that perform limited functions such as personalizing websites for specific customers Infomercials: Direct response marketing on cable and satellite Public Relations: Deliberate effort to maintain long-term relations with public Genomic Data: Genomic sequencing and mapping efforts have produced a number of databases which are accessible over the web 10.7 LEARNING ACTIVITY 1. What is meant by Analytical CRM? ___________________________________________________________________________ ___________________________________________________________________________ 2. Explain the steps in Analytical CRM Process. ___________________________________________________________________________ ___________________________________________________________________________ 3. What is CRM Architecture? ___________________________________________________________________________ ___________________________________________________________________________ 10.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is CRM Architecture? 174 CU IDOL SELF LEARNING MATERIAL (SLM)
2. What is PRA? 3. What is EMA? 4. What is SFA? 5. What are the challenges encountered while implementing customer relationship management? Long Questions 1. What is CRM Architecture? 2. What do you mean by Analytical CRM? 3. Describe CRM Application models 4. Describe Application for Architecture CRM 5. Describe Creative strategies in Analytical CRM B. Multiple Choice Questions 1. In an Internet context, this is the practice of tailoring Web pages to individual users ‘characteristicsor preferences. a. WebServices b. Customer-Facing c. Client/Server d. Personalization 2. Process of manage information about customers to maximize loyalty is said tobe a. Company RelationshipManagement b. SupplierManagement c. RetailersManagement d. Customer RelationshipManagement 3. In buyer decision process, percentage of potential customers in a given target market iscalled a. CustomerFunnel b. CompanyFunnel c. MarketingFunnel d. RetailersFunnel 4. System includes all experiences while using market offering is classifieds 175 a. CustomerProposition b. Value DeliverySystem ProductProposition c. DistinctiveProposition CU IDOL SELF LEARNING MATERIAL (SLM)
d. Nature Proposition 5. Electronic booksellers like amazon.com and barnesandnoble.com are likely to enjoy strong sales in the future because books are a product category that: a. Can be delivered digitally b. Are highly standardized c. Require audio or video demonstration d. Do not require pre-purchase trial Answers 1 - d, 2 –d, 3 a , 4 –c , 5 - c 10.9 REFERENCES Reference Books • Customer Relationship Management: A Strategic Approach to Marketing by Mukherjee K • Customer Relationship Management: Concepts and Technologies by Francis Buttle and Stan Maklan • Customer Relationship Management by S Sheel Rani • Data Mining Techniques: For Marketing, Sales and Customer Relationship Management” by Gordon S Linoff and Michael J ABerry • Customer Relationship Management: Concept, Strategy, and Tools by V Kumar and Werner Reinartz Text Book References • Day, G.S. (1986). Analysis for strategic market decisions. St Paul, MN: West Publishing. 4 Cokins, G. (1996). Activity-based cost management: making it work. New York: McGraw-Hill. • Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. • Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. 176 CU IDOL SELF LEARNING MATERIAL (SLM)
• Rust, R.T., Lemon, K.N. and Narayandas, D. (2005). Customer equity management. Upper Saddle River, NJ: Pearson Prentice Hall. • Saunders, J. (1994). Cluster analysis. In G.J. Hooley and M.K. Hussey (Eds). Quantitative methods in marketing. London: Dryden Press, pp. 13-28. Websites • https://www.intotheminds.com/blog/en/experiential-marketing/ • https://study.com/academy/lesson/experiential-marketing-definition-strategies- example.html 177 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT 11 - INFORMATION TECHNOLOGY FOR CRM STRUCTURES 11.0 Learning Objectives 11.1 Introduction 11.2 Multichannel CRM 11.3Multi-channel Network CRM 11.4 Sales Force Eco systems 11.5Summary 11.6Keywords 11.7Learning Activity 11.8 Unit End Questions 11.9References 11.0 LEARNING OBJECTIVES After studying this unit, you will be able to: Understand the concept of multi-channel system Describe Multi Channel Network CRM Describe the nature of sales force eco system List down factors for sales force eco system Understand the SFA Vendors 11.1INTRODUCTION How to channel the process of Multi-Channel Integration Moving on from Customer Relationship Management (CRM) and its significance in the lifecycle of an organisation, the journey gets more challenging and innovative. With the evolution of CRM and Marketing Automation, various factors came into play, affecting marketing decisions and campaign management. The dynamics of the game have changed radically, and today technology, user expectations, and stiff competition, are increasingly forcing enterprises to support their customer service operations through various effective delivery channels. It all started with walk-ins, leading to a strong dependency on call centres – but in current times, the proliferation of the Web has inflated customer expectations, as they want their requests – whether information related or service related - to be fulfilled fast, almost real-time. Considering these factors, managing customer relationships, is deeply connected to marketing 178 CU IDOL SELF LEARNING MATERIAL (SLM)
strategies, with an aim to generate a 360-degree view of the consumer. Websites, email, direct mail, text messaging, and call centres are all key elements to an integrated marketing program, but a coordinated multi-channel program takes it to the next level by incorporating data and new marketing technology for better response rates. Technology, customer expectations, and competitive forces, are increasingly compelling enterprises to support customer service operations through several delivery channels.80% of shoppers are more likely to do business with are retailer who offers them easy and flexible interaction across all channels by means of Multi-Channel Integration. 11.2 MULTI CHANNEL CRM A multichannel marketing system is a technique in which a company interacts with consumers through a variety of channels, both indirect and direct, to sell them goods and services. In this sense, the consumer has more control over the primary purchasing process than the marketer. CRM systems collect data from customers across many channels, or points of contact, with the firm, such as the company's website, phone, live chat, direct mail, marketing materials, and social media. The design, implementation, coordination, and assessment of channels through which companies and customers engage with the objective of increasing customer value through efficient customer acquisition, retention, and development are all covered under multi- channel customer management. When it comes to developing a multi-channel framework for customer management, an organisation faces the following significant obstacles. It was unable to deliver a consistent customer service experience using the multi-channel approach. Companies have typically spent a lot of time and money building integration programmes to interact between various systems since they don't have a single information source. To allow different systems to communicate. The systems will seldom work in real time in such a complicated configuration, delaying data synchronisation. When modifications to one channel are not quickly reflected in the others, this can generate embarrassment for businesses and frustration for customers. The second issue is that it increases the amount of overhead. Each distribution channel's integration must be developed, administered, and maintained separately from the actual customer support applications. Each time a modification is made to a channel application, the difficulty, complexity, and costs are amplified. Multi-channel integration is required to overcome this problem. Complete Customer Data Integration (CDI), or an integrated, one picture of the customer across all channels, would be ideal for a company. The ideal database would show the channels each client used at each stage of the decision-making process, including the channels of competitors. 179 CU IDOL SELF LEARNING MATERIAL (SLM)
.The days of your consumers just being able to communicate with you over the phone are long gone, thanks to the rapid advancement of new technology. Customer service is one of those industries where less isn't always more. Your clients should be able to contact you no matter where they are, whether they are sitting at their computer, waiting at an airport, or resting on a beach. The more discussions you have with your consumers, the stronger your relationship with them will be and the more loyal votes you will receive. As a result, multi- channel assistance is your best choice if you want to create a name in the industry while also providing excellent customer service. Although most consumers prefer traditional means such as emails and phone calls, this is not the case with teenagers. Thanks to the millennial age, platforms like SMS, social media, live chat, and self-service have experienced tremendous growth. The efficiency and rapid reaction time associated with these channels might be a major factor in this increase. Businesses are always attempting to make it as simple as possible for customers to purchase anything from them in order to adapt to this reality. Excellent client service CRM in today's world must provide a comprehensive picture of everything your customers want, as well as information of their buying inclinations. This will only be feasible if your CRM has the capacity to collect data from several platforms. Let's look at some of the advantages of a CRM that supports multichannel communication. Evolving from a mere name and a phone number, customers today are a detailed profile. When you give your customers the independence to connect with you on multiple channels, you are collecting more data to build that customer profile. Whether they prefer using live chat, the kind of social media posts they show interest in or are more active over calls or emails. These are certain questions that you need in order to define that customer. A CRM is helpful in this regard. It helps you gather any and all interactions a customer has had with your company in one database. In short, the more you know about your customers, the easier it becomes to determine their needs and wants. The fundamental goal of multichannel customer service is to provide customers a variety of ways to interact with a business in the event that they have a complaint or feedback to submit. Implementing a unified customer knowledge base creates a single version of the truth across all channels, ensuring that responses are consistent regardless of how the client contacts you. Excellent client service CRM in today's world must provide a comprehensive picture of everything your customers want, as well as information of their buying inclinations. This will only be feasible if your CRM has the capacity to collect data from several platforms. Let's look at some of the advantages of a CRM that supports multichannel communication. Customers have evolved from a simple name and phone number to a comprehensive profile. When you allow your consumers the freedom to communicate with you via different channels, you're collecting more information for your customer profile. Whether they prefer live chat, the types of social media postings they are interested in or are more engaged on the 180 CU IDOL SELF LEARNING MATERIAL (SLM)
phone or via email. These are some of the questions you'll need to answer in order to characterise that customer. In this case, a CRM comes in handy. It allows you to compile all of a customer's interactions with your firm into a single database. In other words, the more information you have about your clients, the easier it is to evaluate their requirements and desires. It is more important than ever for a company to have a successful Omni channel strategy. According to study, organisations with a great Omni channel customer interaction strategy keep 89 percent of their consumers, whereas companies with weak Omni channel strategies keep only 33 percent. Aside from the positive influence on client retention and revenue, the most important benefit of an Omnichannel approach is that it makes your company adaptable and versatile. In comparison to multichannel enterprises, an Omni channel brand can adapt and evolve quicker as new channels arise and customer behaviour changes. We live in a hyper-connected digital world where customers are always reading reviews. CRM has gone a long way since its humble beginnings as a back-office contact and customer management tool. Advanced CRM nowadays can enable cross-channel engagement and utilise AI and technologies like chat bots to provide highly tailored customer experiences. Customer Relationship Management (CRM) is at the heart of your efforts to allow new brand strategies, integrate cutting-edge technology, and stay on top of emerging customer experience trends. A CRM system also sets the groundwork for your sales, marketing, and customer care teams to be successful. Customer data Integration (CDI) CDI gives rise to the following questions: The CDI raises the following issues: Which data should be combined? Is it enough to just integrate purchase data, or should search data be included as well? Which aspects of marketing benefit from integration? Cross-selling is an apparent winner, but what about other marketing strategies? What is the minimum amount of data integration that is acceptable? Is it absolutely necessary? Is data integration worthwhile? Is it worthwhile to spend in obtaining a single customer view? 181 CU IDOL SELF LEARNING MATERIAL (SLM)
Managers must understand how customers pick channels and how those decisions affect their overall purchase patterns. As a result, the following are the most important customer-choice questions: As a result, CDI raises the following issues: What factors influence consumer channel preferences? What are the most essential channel characteristics? Do marketing communications have an impact on channel selection? Is it possible to segment clients using a multi-channel approach? Is it true that different categories of customers utilise different channels and combinations of channels? Do customers choose channels based on the channel or the company? Does the client say, \"I'll check out a few websites of stores who offer HDTVs first,\" or \"I'll check out Sony's website first, then head to the store for a closer look\"? Do customers think about businesses at all throughout the search process? How does a multi-channel environment affect consumer loyalty? Is it true that a multi-channel approach boosts sales? Technology in Use Now Another key issue that affects multi-channel integration is technological investment and widespread use, since many businesses have already made significant investments in technologies that support different systems. To link them all, integration at the enterprise level would be required. Connecting themall would necessitate enterprise-wide integration, which might necessitate a significant technological upgrade at a high expense. Expertise on both sides of the Atlantic According to a marketer survey, 43.3 percent of senior marketers in the United States regard cross-channel marketing campaign coordination to be highly important, and 46.4 percent believe it to be important. When companies opt for enterprise-wide channel integration, one of the biggest issues marketers confront is a lack of cross-channel knowledge. As a result, multi-channel integration is resisted since contact points are unclear and the ease of shifting from one channel to another is unknown. Marketers must go past their fears. To effectively accomplish their aims, marketers must overcome their own organisations' barriers to cross-channel integration, breaking down structural divisions and educating themselves about integrated marketing best practises to overcome other logistical obstacles and create coordinated campaigns. 182 CU IDOL SELF LEARNING MATERIAL (SLM)
The complexities and complexity of multi-channel marketing might be daunting, but there are four essential stages that can help establish a strong foundation for the strategy before it is implemented — choose a multi-channel approach that gives your customers an edge and a benefit, such as the opportunity to verify the availability of an item before going to the shop. Prior to going to the store define a multi-channel network architecture that defines channel responsibilities and investment priorities in terms of customer value. Manage the customer experience across all channels and execute on the brand promise on a consistent way. Build the capabilities needed to advertise a multi-channel business – this may be done by ensuring that CRM capabilities allow for multi-channel management. Framework for Multi-Channel Customer Management Organizations must choose a strategy that allows them to do the following: Assess their current multi-channel capability to discover commercial opportunities. 11.3 MULTI CHANNEL NETWORK CRM Define a multi-channel network architecture that defines channel responsibilities and investment priorities in terms of customer value. Manage the customer experience across all channels and execute on the brand promise on a consistent way. Build the capabilities needed to advertise a multi-channel business – this may be done by ensuring that CRM capabilities allow for multi-channel management. Framework for Multi-Channel Customer Management Organizations must choose a strategy that allows them to do the following: Assess their current multi-channel capabilities to determine which parts of their company and IT landscape may be optimised to improve multi-channel capabilities. . To identify possible gaps and problems in particular channels, assess their current degree of channel integration across people, processes, and technology. Define the future state based on the present stage of multi-channel maturity and the business objectives of your clients. Assess the scalability and applicability of existing systems/technologies in light of the new multi- channel needs. Formulate a transformation and technological roadmap for implementing the multi-channel strategy that has been developed. Implement the multi-channel efforts that have been developed. Continuously monitor, support, and implement improvements the diagram depicts a common strategy that businesses might use to develop multi-channel integration. - A Multichannel Customer Management Framework Purchase After Sales Post Evaluation Channel Data Channel Strategy Channel Evaluation Consumer Channel Perceptions and Preferences Coordination of Channels Price, Production, and Promotion are all factors in resource allocation. - Selecting a channel – Design, Distribution, and Service – 1. The customer moves through the stages of recognising a need, gathering information, making a purchase, and receiving after-sales care. A consumer may, for example, realise that he or she requires life insurance. The consumer looks for information about life insurance 183 CU IDOL SELF LEARNING MATERIAL (SLM)
through multiple channels, chooses which channel to buy through, and then receives sales assistance (advice on expanded coverage, etc.) through that channel. Step 2 - First, channel selection is influenced by customer perceptions and preferences (e.g., the customer may prefer the Internet for search because it is easy to use 3 - Second, the client assesses and learns from his or her experiences, which informs his or her views and preferences, which lead his or her future purchasing job (e.g., the customer may learn that the Internet search did not answer all the important questions). 4 - Finally, the consumer picks both channels (A or B) and firms (k), making it a two- dimensional option from the customer's perspective. The data provided by the customer choice process is usually the starting point for the management decision process. The data is at the consumer level—which channels did the client utilise for which purposes, and what did he or she buy? The firm's decision is consistent with the firm's concentration on the client. The firm’s decision process is driven by such customer-level data. After the data have been assembled, the firm evaluates its channels (Are they profitable? Are they serving the purposes for which they are designed?).With this knowledge in hand, the manager can specify a multichannel strategy (which channels to employ, how to design them, how to allocate resources across channels) and a marketing plan (pricing, assortment, service levels) for implementing the strategy.Such customer-level data drives the firm's decision-making process. Following the collection of data, the company assesses its channels (are they profitable?). Are they accomplishing the goals for which they were created?). With this information, the management may devise a multichannel strategy (which channels to use, how to build them, and how to allocate resources across channels) as well as a marketing plan (price, assortment, and service levels) to put the strategy into action. Companies, who want to succeed in multichannel marketing, or any other type of digital marketing, strive to create campaigns that can readily transcend numerous media. Companies cater to consumers and adjust campaigns to meet different channels since expecting customers to conform to the company's chosen channel is unreasonable. Companies also want to know which campaigns on which channels result in the most sales, so they can assess the efficacy of their efforts and calculate the return on investment of their presence on each channel. Sales management using feedback: Companies can collect feedback from various consumer groups by maximising marketing efforts by pushing a message through as many channels as feasible. This input may be used to assess overall performance, and crowd sourced information can be used to enhance it. Operational expenses are reduced by ensuring that resources are utilised effectively and efficiently. More sales: The more prominent a message is, the more prospective consumers a business may draw in. Concentrating efforts on a single channel limits your ability to reach the most 184 CU IDOL SELF LEARNING MATERIAL (SLM)
potential consumers. Companies may make advantage of their online presence in a variety of ways. 11.4 SALES FORCE ECO SYSTEM THE SFA ECO-SYSTEM The SFA eco-system is made up of three components: 1. SFA solutions providers, 2. Hardware and infrastructure vendors, and 3. Associated service providers. 1. SFA solutions providers SFA solutions providers can be classified in a number of ways. Some are SFA specialists. They compete against enterprise and mid-market CRM suites that include SFA modules, and enterprise suite vendors that offer a full range of IT solutions to support business, including supply chain management (SCM), enterprise resource planning (ERP) and customer relationship management (CRM). A number of illustrative examples are given in Table below. Table showing Classification of SFA vendors (sample only) SFA specialists SFA as part of CRM suite SFA as part of enterprise suite Cyber Forms Microsoft Dynamics IBM Sales net Salesforce.com Oracle Selectica ALWAlOGIX SAP SFA solutions, like other CRM technologies, are accessed in one of two ways. The solution can either be installed on the user company's own servers or it can be accessed on another party's servers via the Internet. The former is known as on premise, offline or installed SFA. The latter is known as hosted, online or on-demand SFA, web-service, the ASP (Application Service Provider) model, or the Software as a Service (SaaS) model. Salesforce.com was the early leader in offering SaaS, and other major CRM solutions providers have since responded with their own SaaS offers. Access for SaaS users is on a pay-as-you go (price per seat per month) or subscription basis. Some SFA specialists focus on particular areas of functionality within SFA. Selectica, for example, builds customized configurators. A configurator is a rule-based engine that allows 185 CU IDOL SELF LEARNING MATERIAL (SLM)
companies to configure complex products and services for clients. Sometimes, customers interact directly with configurators rather than collaborating with a sales rep who has access to the technology. 2. Hardware and infrastructure The performance requirements of SFA applications can create significant challenges for both hardware and technology infrastructure. Whereas office-bound salespeople and sales managers might be happy to use desktops or laptops, field sales staff mostly prefer to use mobile data devices: smart phones or tablets. Where companies have geographically dispersed external salespeople, SFA systems have to operate 24/7 in real time, allowing organizations to manage opportunities as quickly as possible. SFA applications often need to integrate with back-office systems so that field sales has visibility of, for example, outstanding service issues or order progress in advance of a client meeting. 3. Services The services component of the SFA ecosystem is very diverse. When a SFA project is undertaken, service costs may add significantly to overall project expenditure. In addition to paying for software and hardware, SFA project leaders might buy services from providers that re-engineer selling processes, manage projects, train salespeople, and consult on sales force organizational structure or conduct customer portfolio analysis. Service providers can contribute significantly both to SFA project costs and the probability of success. The hardware and software for a SFA project may account for between 10 per cent and 50 per cent of overall costs. The balance is made up of service costs. Although some software vendor case studies suggest that payback is achievable within days, many projects take between 12 months and 24 months to implement, let alone yield a return. It has been suggested that the average implementation period is 21 months and that users need over 100 hours experience with new technologies before they could claim to have mastered it. 10 During the implementation period, salespeople will need to populate the SFA system with data from operational databases and then learn how to analyse and leverage the data. This can take much longer than the purely technical implementation of a software system. 11.5SUMMARY Theconsumer has more control over the primary purchasing process than the marketer. Complete Customer Data Integration (CDI), or an integrated, one picture of the customer across all channels, would be ideal for a company. The fundamental goal of multichannel customer service is to provide customers a variety of ways to interact with a business in the event that they have a complaint or feedback to submit. 186 CU IDOL SELF LEARNING MATERIAL (SLM)
When companies opt for enterprise-wide channel integration, one of the biggest issues marketers confront is a lack of cross-channel knowledge. A configurator is a rule-based engine that allows companies to configure complex products and services for clients. 11.6KEYWORDS CDI- Customer data Integration Customer Data Integration (CDI) is the process of consolidating and then properly managing information about your customers from all available business sources, including all known: Contact details. A Multichannel Marketing System is a technique in which a company interacts with consumers through a variety of channels, both indirect and direct, to sell them goods and services. On-premises, offline or installed SFA Model- The solution can either be installed on the user company's own servers Hosted, online or on-demand SFA, web-service, the ASP Model- The solution can be accessed on another party's servers via the Internet. 11.7LEARNING ACTIVITY 1. Define Multi-channel CRM ___________________________________________________________________________ ___________________________________________________________________________ 2. Define Sales Force Eco System ___________________________________________________________________________ ___________________________________________________________________________ 11.8UNIT END QUESTIONS A. Descriptive Questions 187 Short Questions 1. Define Multi channel CRM? 2. What is the main elements of Multi-channel CRM process? 3. ExplainMulti channel network organisation with examples 4. Determine the term CDI. 5. How the sales force eco system can work? Give your reasons. Long Questions CU IDOL SELF LEARNING MATERIAL (SLM)
1. What are the different methods multi-channel distribution systems? Suggest from your view? 2. Explain the CDI. How can u apply this concept? Give relevant example to support it? 3. Is the sales force eco system process relevant for the growth of an organisation? Critically examine with relevant reason. 4. Explain Sales Force Eco Systems in detail? 5. What are thebenefits of Marketing Automation? B. Multiple Choice Questions 1. Service provided by marketing through the collective customer level is known as ______ a. Functional Integration b. Product Integration c. Channel Integration d. Marketing Integration 2.The situation the company uses two or more different channel is classifies as ____ a. Multi-Channel Marketing b. Facilitator Marketing c. Integrated Marketing d. Interchanging Marketing 3. Which of the following is NOT a part of marketing communication mix? a. Telemarketing b. public relations c. Sales promotion d. Advertising 4. Marketing strategies are often designed to influence _______________ and lead to profitable exchanges. a. Consumer decision making b. Sales strategies 188 CU IDOL SELF LEARNING MATERIAL (SLM)
c. Advertising strategies d. Export strategies 5. ___ is a telecommunication tool that effectively routes and distributes incoming calls in an even way to a specific group of people. a. An Automatic Call Distributor (ACD) b. Reactive response c. Active Response d. deactivated response Answers 1 - c, 2 – a, 3 - a, 4 – a, 5 - a 11.9REFERENCES Reference Books • Customer Relationship Management: A Strategic Approach to Marketing by Mukherjee K • Customer Relationship Management: Concepts and Technologies by Francis Buttle and Stan Maklan • Customer Relationship Management by S Sheel Rani • Data Mining Techniques: For Marketing, Sales and Customer Relationship Management” by Gordon S Linoff and Michael J ABerry • Customer Relationship Management: Concept, Strategy, and Tools by V Kumar and Werner Reinartz Text Book References • Day, G.S. (1986). Analysis for strategic market decisions. St Paul, MN: West Publishing. 4 Cokins, G. (1996). Activity-based cost management: making it work. New York: McGraw-Hill. • Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. 189 CU IDOL SELF LEARNING MATERIAL (SLM)
• Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. • Rust, R.T., Lemon, K.N. and Narayandas, D. (2005). Customer equity management. Upper Saddle River, NJ: Pearson Prentice Hall. • Saunders, J. (1994). Cluster analysis. In G.J. Hooley and M.K. Hussey (Eds). Quantitative methods in marketing. London: Dryden Press, pp. 13-28. Websites • https://www.intotheminds.com/blog/en/experiential-marketing/ • https://study.com/academy/lesson/experiential-marketing-definition-strategies- example.html 190 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT 12 -INFORMATION TECHNOLOGY FOR CRM STRUCTURE 12.0 Learning Objectives 12.1 Introduction 12.2 Sales force Automation 12.3 Marketing Automation 12.4 service Automation 12.5Summary 12.6 Keywords 12.7Learning Activity 12.8Unit End Questions 12.9References 12.0 LEARNING OBJECTIVES After studying this unit, you will be able to: Understand concept of sales force Automation Describe concept of marketing Automation Describe service force Automation Understand nature of service force Automation 12.1INTRODUCTION Sales Force Automation (SFA) has offered technological support to salespeople and managers since the beginning of the 1990s. SFA is now so widely adopted in business-to business environments that it is seen as a 'competitive imperative that offers competitive parity'. In other words, SFA is just a regular feature of the selling landscape. Salespeople are found in a wide variety of contexts - in the field calling on business and institutional customers, in offices, contact centres and call centres receiving incoming orders and making outbound sales calls, in retail business-to-customer settings, in the street selling door-to-door, and even in the home, where party planners sell a variety of merchandise ranging from adult sex aids to cleaning products. All these sales contexts deploy SFA in some form or other. Marketing Automation is the application of computerized technologies to support marketers and marketing management in the achievement of their work-related objectives. Many 191 CU IDOL SELF LEARNING MATERIAL (SLM)
marketing positions can make use of MA including marketing manager, campaign manager, market analyst, market manager, promotions manager, database marketer and direct marketing manager. Hardware and software are the key technological elements of MA. Hardware includes desktop, laptop, tablets and smart phones. Software comprises both 'point' solutions that are designed to assist in a single area of marketing or marketing management, and integrated solutions that offer a range of functionality. Marketing automation can deliver several benefits, including enhanced marketing efficiency, greater marketing productivity, more effective marketing, enhanced responsiveness, improved marketing intelligence, a better customer experience and higher levels of customer engagement. Service Automation is the application of computerized technologies to support service managers, and customer service agents in contact and call centres, help-desk staff and mobile service staff operating in the field, in the achievement of their work-related objectives. Academics, practitioners and government agencies have attempted to understand and characterize customer service and service quality. Companies and their customers can experience many benefits from service automation: enhanced service effectiveness and efficiency, greater service productivity, better agent work experience, and improved customer experience, engagement and retention. Service automation applications offer a range of functionality to service managers and technicians: activity management, agent management, case assignment, case management, contract management, customer communications management, customer self-service, email response management, escalation, inbound communications management, interactive voice response, invoicing, job management, knowledge base self-service, mapping and driving directions, outbound communications management, predictive dialling, queuing and routing, scheduling, scripting, service analytics, service level management, spare parts management, voice biometrics, Web collaboration and workflow development. 12.2 SALES FORCE AUTOMATION Sales force automation (SFA) can be defined as follows: Sales force automation is the application of computerized technologies to support salespeople and sales management in the achievement of their work-related objectives. Hardware and software are the key technological elements of SFA. Hardware includes desktop, laptop and handheld devices such as tablets and smart phones, and contact/call centre technology. Software comprises both 'point' solutions that are designed to assist in a single area of selling or sales management, and integrated solutions that offer a range of functionality. Integrated packages are offered as SFA-specific packages only or can be incorporated into more comprehensive CRM suites that operate over the three front-office areas of marketing, service and sales. 192 CU IDOL SELF LEARNING MATERIAL (SLM)
All SFA software is designed so that companies can collect, store, analyse, distribute and use customer-related data for sales purposes. Customer-related data are key to customer orientation and the development of long-term mutually beneficial relationships with customers. SFA software enables reps and their managers to manage sales pipelines, track contacts and configure products, amongst many other things. SFA software also provides reports for sales reps and managers. In short, SFA enables salespeople and sales managers to become more effective or efficient in the pursuit of their objectives. SOFTWARE FUNCTIONALITY Account Managementoffers sales reps and managers a complete view of the customer relationship including contacts, contact history, completed transactions, current orders, shipments, enquiries, service history, opportunities and quotations. This allows sales reps and account managers to keep track of all their obligations in respect of every account for which they are responsible, whether this is an opportunity to be closed, an order or a service enquiry. Activity Managementkeeps sales reps and managers aware of all activities, whether complete or pending, related to an account, contact or opportunity, by establishing to-do lists, setting priorities, monitoring progress and programming alerts. Activities include preparation of quotations, scheduling of sales calls and following up enquiries, for example. Table Showing Functionality offered by SFA software Account management Pipeline management Activity management Product encyclopaedias Contact management Product configuration Contract management Product visualization Document management Proposal generation Event Management Quotation management Incentive Management Sales forecasting Lead Management Sales management reporting Opportunity management Territory Management Order Management Workflow development 193 CU IDOL SELF LEARNING MATERIAL (SLM)
Contact Management functionality includes tools for building, sharing and updating contact lists, making appointments, time setting, and task, event and contact tracking. Contact list data include names, phone numbers, addresses, images, preference data and email addresses for people and companies, as well as a history of in-bound and out bound communications. Contact management functionality is a cornerstone of most SFA applications. When contact management functionality supports the goal of having a single view of the customer, customer-facing staff in all parts of the business - sales, marketing, service, customer accounts - can see the history of communications with the customer. It means that a late- paying customer can be speaking to an accounts receivable team member who will know that the customer is in negotiations with a sales team member for a large contract. Rather than demand payment, the clerk may take a more judicious approach that does not put the opportunity at risk. Contract Management functionality enables reps and managers to create, track, progress, accelerate, monitor and control contracts with customers. Contract management applications manage a contract's lifespan by shortening approval cycles for contracts, renewing contracts sooner and reducing administrative costs. The software may use security controls to ensure only approved people have access to contracts. Document Management software allows companies to manage sales-related documents, keep them current and ensure that they are always available to reps, managers and partners when needed. Companies generate and use many documents to support the sales process - brochures, product specifications, installation instructions, user manuals, case studies, white papers, price lists, warranties, competitive comparisons, spreadsheets, email templates and templates for preparing quotations, for example. External agencies, including government departments, may require companies to maintain records of compliance with standards or regulations relevant to the products and services they sell these documents can be stored securely online, versioned to ensure they remain traceable and current, and downloaded on- demand. Metadata, that is, data about data can be applied to documents so that the correct materials can be found quickly. Event Management enables sales reps, managers and others to plan, implement, control and evaluate events such as conferences, seminars, trade shows, exhibitions and webinars, whether run solo or jointly with customers or other partners. Some events, such as conferences, can be very complex and involve many stakeholders such as sponsors, exhibitors, security partners, police, accommodation partners, and travel partners, catering partners, lighting and sound contractors, guest speakers, invitees and the general public. Indeed, some major events are planned many years in advance - you only need to consider the Olympics or FIFA World Cup to appreciate the grand scale of some major events. Sales- related events don't reach a comparable level of complexity, but events to which customers and key partners are invited must run smoothly, or the company risks being regarded as unprofessional. 194 CU IDOL SELF LEARNING MATERIAL (SLM)
IncentiveManagement is an issue for sales managers who use commissions and other incentives to lift and direct sale reps' efforts, and to reward performance. In many companies, commissions are calculated using stand-alone spreadsheets. When part of a sales force automation solution, incentive management eliminates the need to re-enter or transfer data from spreadsheets, leading to better visibility, accuracy and higher efficiency. With incentive management models that consider quotas, sales volumes customer profitability, customer satisfaction, customer retention, Net Promoter Scores and other performance criteria can be created. Sales team members can be given complete visibility into the sources and components of their commission. Incentive management applications can be linked into back- office payroll applications that automate payment. Lead Management allows companies to capture, score, assign, and nurture and track sales leads. Effective lead management processes are important because a significant proportion of leads, estimated at between 40 per cent and 80 per cent, are lost before the sales cycle is completed. Leads can be captured from various touch points - web form or registration page on a company website, or a Facebook page for example - and automatically fed into the lead management system. Some SFA systems are integrated with external databases that can be searched for relevant leads. Opportunity Management software enables reps and managers to monitor progress of an opportunity against a predefined selling methodology, ensuring that opportunities are advanced towards closure. An opportunity is a record of a potential sale or any other type of revenue generation. There are a number of selling methodologies all of which identify a number of stages such as lead qualification, initial approach, understanding the customer's requirements, developing a solution, crafting a proposal and closing the sale. Salespeople follow the steps of the methodology as if following a checklist, ensuring that all opportunities are handled consistently. Sales reps can associate their ow opportunities with additional information such as contacts, activities, pricing rules, products, proposals, projects, presentations, quotations, competitors, estimated revenue cost-of-sales, probability of closure, sales stage and so on. Managers can receive reports on the progress of opportunities as they move towards closure, broken down by salesperson, territory, type, date or other criteria. Figure 8.6 shows an opportunity management report. Note the selling model in the window on the left at the bottom of the screen, and the probability of closing the opportunity at the top of the screen. Order Management functionality allows reps to convert quotations and estimates into orders once a customer has made the decision to buy. Order management software may include a quotation engine, a pricing module and a product configurator. Order management functionality accelerates the order-to-cash cycle by eliminating manual processing and errors and by quickly advancing the status of a sales quotation to approved order. The order management process can be integrated with back-office fulfilment, invoicing and payment processes, thereby accelerating cash flow for the seller. If order management functionality is 195 CU IDOL SELF LEARNING MATERIAL (SLM)
used in front of a customer, the order can be loaded into production or picked from a warehouse more quickly. With visibility through a portal, the customer, rep and manager have access to the same, up-to-date order information. Some order management systems allow customers to manage their bills and other information online, thereby reducing account management costs for the seller. Pipeline Management is the process of managing the entire sales cycle, from identifying prospects, estimating sales potential, managing leads, forecasting sales, initiating and maintaining customer relationships, right through to closure. A well-defined sales pipeline helps minimize lost opportunities and breakdowns in the sales process. Sales pipelines typically have between five and seven defined stages such as lead generation, lead qualification, initial meeting, submit quotation, sales presentation and closure. As opportunities move through the pipeline the probability of making the sale increases. For example, a sales rep might assign a 5 per cent probability of closing the sale to an opportunity that reaches 'initial meeting' stage, but a 60 per cent probability to an opportunity at the sales presentation' stage. Because these probabilities indicate that not all opportunities will progress down the pipeline, sales reps know that they have to have three to four times the value of their target or quota in the sales pipeline. A Product Encyclopaedias a searchable electronic product catalogue that generally contains product names, stock numbers, images and specifications. These can be stored on reps' computers, smart phones and tablets and/or made available to customers and partners online. Product Configuration applications enable salespeople, or customer themselves, auto design and price customized products, services or solutions. Configurators are useful when the product is particularly complex or when customization is an important part of the value proposition. Configurators guide users through the buying and specification process, offering only valid options and features at each step. This can deliver benefits to customers, salespeople and management. Customers can define and build their preferred customized solutions, reducing cost and meeting specifications. Salespeople no longer need master comprehensive product or service technical data, because these are built into the engine. Training costs for salespeople are therefore reduced. The potential for incorrectly specifying a solution for a customer is decreased. Configurators enable mass customization. Product Visualization software enables sales reps and customers to produce realistic computer-generated images or animations of products before they are manufactured. This is a useful application when linked to a product configurator. Static images can take the form of a simulated photograph, 3-D model or technical drawing. Some applications allow these images to be drag-and-dropped into different settings or contexts. Animated visualizations can be rendered in different ways to show how products are built, installed or used. Visualization software often allows users to change certain parameters, for example models, colours, fabrics and sizes, as in the Jeep example. Visualizations can be augmented by other information such as specifications or prices. 196 CU IDOL SELF LEARNING MATERIAL (SLM)
Proposal Generation software allows users to create customized branded proposals for customers. Users draw on information held in one or more databases to create proposals which, typically, are composed of several parts, some of which are customized: cover page and letter, introduction, objectives, products, product features, services, benefits, prices, specifications, pictures, drawings, embedded video, people, experience, résumés, references, approach, schedule, organization, scope of work and appendices. Proposal templates can speed up the creation of proposals that can then be delivered to customers whilst they are in buying mode. Templates exist for different types of proposals such as Statements of Work, Grant Applications and Service Level Agreements. Some can even be co-created on the fly in real time as customer and salesperson talk through what is required. One survey suggests that proposals produced with software have a much higher win rate (46 per cent) than proposals produced manually (26 per cent). Quotation Management software allows reps and managers to prepare costed proposals - quotes for opportunities. The software allows users to create, edit, approve and produce costed, customized proposals quickly and reliably. Some software enables users to create multimedia quotations with audio, animation and video. Sales Forecasting applications offer sales reps and managers a number of qualitative and quantitative processes to help forecast sales revenues and close rates. Among the qualitative methods are sales team estimates that can be created collaboratively, and among the quantitative methods are time-series analysis and regression models. Some sales forecasting methods project historical sales into the future. Other methods draw on and interpret the sales opportunity and pipeline data maintained in CRM systems. Another method is to import data from external sources and apply quantitative methods to forecast sales. Accurate sales forecasts help resource allocation throughout the business. Sales Management reporting functionality is integrated into all SFA systems. This offers users a number of standardized reports that can help sales managers evaluate and enhance the effectiveness and efficiency of their sales team. In addition, managers can create ad hoc reports on any variable or mix of variables maintained in the sales database this can include reports on all the issues we are discussing here: contacts, contracts, orders, opportunities, proposals, sales pipeline and so on. Salesforce.com, for example, offers over 50 standard reports, and enables users to construct their own customized reports using wizards. These deliver charts, tables, text and other graphics to receivers' devices. Dashboards deliver real-time sales data to executives that can be refreshed at a single click. Customized dashboards ensure that people receive reports matched to their roles and responsibilities. Drill-down capabilities mean that users can thoroughly investigate the reasons behind results in dashboard reports. Furthermore, dashboards can be integrated with third-party analytics to deliver deeper analysis of sales performance and problems. 197 CU IDOL SELF LEARNING MATERIAL (SLM)
Territory Management applications allow sales managers to create, adjust and balance sales territories, so that sales reps have equivalent workloads and/or opportunities. Territory management applications usually come with a territory management methodology that users can follow when establishing sales territories. Some applications integrate geographic mapping or geo-demographic data into the application. Applications generally enable companies to match sales coverage to market opportunity, create sales territory hierarchies (cities, states, regions) and reduce the cost of selling by reducing travel time. Call cycle scheduling, calendaring and lead management is often enabled by the software. Eligibility and exception rules can be established in and monitored by the software. A sales rep might be eligible to sell some products but not others, to service all customers in her territory with the exception of certain named accounts, or to sell into certain accounts in another territory because she has a well-established customer relationship. Workflow Development software is used to design sales-related processes including the lead management process and the event management process. A simple automated workflow spells out the actions that are taken when a web-form enquiry is received by the business. A more complex project is to automate the workflow in the selling process itself - the series of steps that a sales rep must follow in shifting a prospect from initial awareness to the close. Some leading SFA applications contain modules where selling workflow follows established published methodologies. For example, Microsoft Dynamics CRM has a module for Solution Selling and Oracle CRM for Target Account Selling. Workflow applications automate business processes, so that process owners know what to do, the order in which actions should be performed and who is responsible for each action. Automated processes are much easier to monitor for process failure. When a process fails, often this can be an indication that the process needs to be simplified, user training needs to be refreshed or technological support for the process needs to be upgraded. Although we have thus far discussed a generic set of sales-related functionality, SFA software is also designed for context-specific applications. For example, sales reps selling liquor to a retail store might employ software that recommends planograms, optimizes the allocation of retail display space, audits inventory levels, recommends prices and controls cooperative promotional support. In some contexts, graphics, video and sound support are important. Leading SFA vendors offer functionality designed for salespeople in particular industries. SAP CRM and Oracle CRM, for example, both offer customized SFA solutions for over 20 different industries ranging from aerospace and defence to wholesaling. These solutions come with industry-specific database models. Benefits from SFA Vendors and consultants claim a number of benefits from SFA implementation, including accelerated cash flow, shorter sales cycles leading to faster inventory turnover, improved customer relationships, improved salesperson productivity, accurate management reports, increased sales revenue, market share growth, higher win rates, reduced cost-of-sales, more 198 CU IDOL SELF LEARNING MATERIAL (SLM)
closing opportunities and improved profitability. These benefits appeal to differing SFA stakeholders: Salespeople: shorter sales cycles, more closing opportunities, higher win rates. Sales Managers:improved salesperson productivity, improved customer relationships,accurate reporting, reduced cost-of-sales. Senior Management: improved visibility of the sales pipeline, reduced risk of unexpected variations from sales forecasts, accelerated cash flow, increased sales revenue, market share growth, improved profitability. In addition to these hard outcomes, there may be additional softer benefits such as less rework, more timely information and better-quality management reports. Software vendor case histories of SFA implementations offer testimonials to SFA's impacts. 12.3 MARKETING AUTOMATION Marketing practices have historically been very ad hoc. Some of the major companies, particularly fast-moving consumer goods companies such as Unilever and Procter and Gamble, have bucked the trend and developed marketing processes that brand managers, segment managers, market managers and marketing managers are obliged to follow. However, they are the exception. In general, marketers have not been structured in the way that they plan, implement, evaluate and control their marketing strategies and tactics. Marketing automation has brought increased rigour to marketing processes. Moreover, gone are the days when an organization might run a handful of campaigns every year. The modern, information-enabled marketer can run thousands of highly targeted campaigns based on complex data mining and predictive analytics. CRM technologies enable marketing campaigns to be created for individual customers. MA has now reached such a level ofsophistication that the whole process of marketing from customer selection to offer presentation can be directed by business rules and fuelled by data. Contemporary marketing managers need the ability to adapt and scale up their operational processes to handle the increased complexity facing them. The term marketing automation can be defined as follows: Marketing automation is the application of computerized technologies to support marketers and marketing management in the achievement of their work-related objectives. A very wide range of marketing positions can make use of MA including marketing manager, campaign manager, market analyst, market manager, promotions manager, database marketer and direct marketing manager. Hardware and software are the key technological elements of MA. Hardware includes desktop, laptop and handheld devices such as tablets and smart phones. Software comprises both 'point' solutions that are designed to assist in a single area of marketing or marketing 199 CU IDOL SELF LEARNING MATERIAL (SLM)
management, and integrated solutions that offer a range of functionality. Some integrated packages are dedicated to marketing applications only; others are incorporated into broader CRM solutions that operate over the three front-office areas of marketing, service and sales. Benefits of Marketing Automation Marketing automation can deliver several benefits. These include the following: Enhanced Marketing Efficiency. The replication of marketing processes delivers greater control over costs. When marketers use manual systems and ad hoc processes, there can be considerable inefficiencies. MA enables companies to develop more streamlined, cost efficient processes that can be operated by any marketing incumbent, whether experienced or new-to-role. Greater Marketing Productivity. In the days before MA, marketers might be expected to run a modest number of advertising campaigns and sales promotions in a single year. MA enables companies to run dozens, even thousands of campaigns and events through multiple channels simultaneously without a commensurate increase in the cost and complexity of running the business. More Effective Marketing. MA allows marketers to employ what is known as closed-loop marketing (CLM). CLM is based on a Plan-Do-Measure-Learn cycle, as illustrated in below Figure. Figure 12.1 showing Closed-Loop Marketing Marketers plan a campaign or event, implement the plan, measure the outcomes, learn from the outcomes and subsequently modify the next campaign or event. CLM ensures that companies learn continuously from their marketing activities, achieving higher levels of marketing effectiveness. Companies can also identify and abandon failing marketing initiatives before they drain financial resources. Improved Accountabilityfor marketing expenditure. MA provides better data and analysis on which to judge the commercial return from marketing activities, improved transparency and faster (almost real-time) information for management. Enhanced responsiveness. Marketers have traditionally created and implemented annual marketing plans with campaigns and promotions planned and scheduled many months ahead. 200 CU IDOL SELF LEARNING MATERIAL (SLM)
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